City duty to collect tax stalls in Senate
wLingle still hopes the House will relieve the state of collecting the transit surcharge
Gov. Linda Lingle has lost the first round in her efforts to get the city instead of the state to collect the 0.5 percent general excise tax surcharge for mass transit.
The Senate Intergovernmental Affairs and Transportation and Government Operations committees decided to hold on to Senate bills 2814 and 2383, which would have transferred the tax collection duties for the new county surcharge to the city and also given the city 10 percent for administrative costs.
The current law says the state Tax Department, which now collects the state's 4 percent general excise tax, must collect the 0.5 percent excise tax surcharge. The state also would receive 10 percent of the surcharge revenue for administrative costs.
"The responsibility should be with the state Tax Department," said Transportation Chairwoman Sen. Lorraine Inouye (D, Hilo-Honokaa).
Lingle's administration, however, said they are now hoping that similar measures in the House will move forward.
House bills 2474 and 2420 have not yet been heard by the Finance Committee, the only committee assigned to hear those bills.
"There's still an opportunity on the House side, and so we'll continue to work with the House members," said Linda Smith, the governor's senior policy adviser.
Following last year's session, Lingle agreed not to veto a bill that gave the counties the authority to levy the surcharge if the city and the legislative leaders moved to have the city collect and administer the new tax this year.
Since then, city and state tax officials have been meeting to prepare for collecting the new tax, which will be levied beginning next Jan. 1.
Part of those plans include contracting with a third party to collect both the state's 4 percent general excise tax and the newly enacted 0.5 percent surcharge. State Tax Director Kurt Kawafuchi said the contract would be an electronic method to collect the taxes.
"The critical thing, I think, is that this is a reflection of an agreement with the City and County of Honolulu, the Senate president and the House speaker. We'd like that agreement to be honored," Smith said.
Inouye said retailers in particular were not in favor of two government entities collecting tax. "It will be cost-prohibitive to the businesses. There certainly would be hardship," she said.
But Kawafuchi said his department would be affected as well.
"I think they should think about the hardship and burnout it's going to create for the Tax Department work force," he said. "Our plate is very full as it is."
Kawafuchi said if the Tax Department is forced to take on the added responsibility of collecting a tax that will go to the city, work that his department currently does to collect general fund revenues and delinquent taxes could fall by the wayside.
He said, "They'll (his employees) do whatever I ask them ... but they really do not want to have to take over this responsibility."